Stock surge
Nebraska land purchase publicized by company. Visualization by Colby Woodson

Good-government advocates are raising doubts about a Canadian mining company whose stock has soared despite its failure over the last decade to develop a critical-minerals site in Nebraska, even as it paid its executives hefty salaries.

NioCorp, a Vancouver-based company headquartered in Colorado, has not unearthed commercial quantities of niobium, scandium and titanium at a site in Elk Creek, Nebraska, even though it has leased property there since 2010.

But the outfit’s stock price nearly doubled to a high of $1.25 in March after regulators lifted a halt on trading imposed in preparation for the company’s announcement of a land purchase intended for its mine. It made that announcement on Feb. 22, noting that it would develop the site once it had enough financing for construction.

Critics such as Jack Gould at Common Cause Nebraska, a watchdog organization, charge that NioCorp has hyped tax credits from the Nebraska Department of Revenue to attract investors’ interest, and benefited from favorable relations with state policymakers who have investments in the company.

“When they came up with the multimillion-dollar tax credit, a lot of people in government were saying ‘well, they’ll never meet the criteria,’ but they publicized it,” Gould said, referring to the Nebraska Department of Revenue’s approval of NioCorp’s tax incentive application.

The department said it doesn’t offer an estimation to applicants of what their tax incentives will amount to, though the company predicts the contracts would reduce its state and local tax liability by as much as $200 million.

“Most people say they’re just trying to sell stock,” Gould said, referring to the company’s practice of publicizing its tax-incentive approvals.

After hovering between 50 and 75 cents a share for much of the last 12 months, the company’s stock jumped to $1.25 in recent weeks before slipping back to about $1.08 at the end of April.

Former state senator Al Davis, a company shareholder, is cautiously optimistic about the recent increase in the stock price.

“I’m not sure what that had to do with unless it had to do with securing financing, you know, because putting that mine in is extremely expensive,” Davis said.

The necessary investment to build the mine is close to $1 billion, after that construction would take two to three years. The company has amassed a deficit of $96 million since 2010 as it has attempted to raise the large sum of money.

Initially, the cost of the mine was said to range from $300 to $500 million. In early 2015 the company released a preliminary assessment that doubled the price tag, throughout the latter part of that year its stock price dropped from an all-time high of $1.44 to around 50 cents. The stock had stayed around that level until it shot up after the company’s announcement on Feb. 22.

More than half of the company’s investors are reported to be from Nebraska.

“The day that it went up I was trying to find some information on it, and a friend, he sent me a note, he said, ‘are you selling your stock yet?’” Davis said, referring to a call he received about the company’s stock after the price increased abruptly.

“He decided to take his profits,” Davis said.

If built, the mine would yield niobium, scandium and titanium. Those minerals lighten and strengthen aluminum and steel, among other industrial uses.

In 2010, the company began leasing land. Over the next three years, core samples were drilled. At the same time, the company was soliciting investors and hosting public engagements to raise funds for a feasibility study. The study was released in 2016. Since then the company’s activities have revolved around maintaining plans that can be put into motion if the investment comes in.

“It just seems strange. If they had a hole they were digging and they were trying to mine something you’d say, ‘oh well they’re working at it,’” Gould said, referring to the company.

In 2015, Gould filed complaints with the Nebraska Accountability and Disclosure Commission against Tony Fulton, for failure to register as a lobbyist, and Al Davis, for failure to file a conflict of interest statement listing his NioCorp holdings.

At that time, Fulton was a NioCorp board member and Davis was serving as a state senator.

For Gould, the issue arose when Davis withdrew a bill that would have taxed NioCorp’s minerals.

Fulton had told Davis in a meeting that it would be bad for the prospective mine. Fulton was not found to be lobbying by the commission, but Davis was fined $500.

“Fulton argued his way out of it,” Gould said. “I would still call it lobbying.”

Fulton left NioCorp in the latter part of 2015 when he was appointed by Governor Pete Ricketts to head the Nebraska Department of Revenue.

Fulton declined an interview request about his involvement with NioCorp.

Gould said that state politicians have been active in their support for the mine.

Former Lt. Gov. Lavon Heidemann owns land that has been under lease by the company since 2011. In 2016, he became a NioCorp business development consultant.

“He was probably the biggest advocate in Nebraska talking to people and getting them to buy stock,” Gould said.

Issuing stock is primarily how NioCorp funds its overhead. It also receives loans from Mark Smith, the company’s chief executive officer, which come attached to a 10% interest rate, according to SEC filings.

The company’s recent financial report says that continued losses are expected for the foreseeable future and that no assurances can be offered that it will be able to continue. Internal concerns have been a staple in every financial report.

“Certainly not a good housekeeping seal of approval,” according to Bart Naylor, an author, and financial policy advocate at Public Citizen, a consumer rights advocacy group founded by Ralph Nader.

Naylor said that financial reports are written in a binary way.

“Either ‘clean bill of health’ or ‘qualified opinion,’” Naylor said.

That means the quarterly reports’ candid details about increasing deficits and a lack of short-term funding should be taken at face value.

Naylor said that company reports have been filed as an ‘accelerated filer.’ That means that NioCorp’s reporting requirements are less than a large company.

“The theory is that a small company shouldn’t be burdened with some of these regulations because it is stifling emerging business,” Naylor said. “While this company might be small, it’s nevertheless using shareholder money to pay salaries. That absorbs more than half of all of the money that they spend. You know, shareholders are giving them money and it’s going right into the pocket of managers.”Scatter last3 - Watchdogs worry as stock soarsLast year Mark Smith, the CEO, president, executive chairman and director, made a $292,500 annual salary, according to SEC filings.

“I would be concerned that a company that isn’t producing anything is nevertheless deciding to pay somebody,” Naylor said.

Both Davis and Naylor said that Smith’s multiple roles at the company are an issue.

“You end up with one person wearing three different hats,” Davis said. “If that person departs, you’ve got some big holes in the knowledge base.”

“The board of directors is supposed to be the insiders overlooking management,” Naylor said. “Long ago most good companies realized they couldn’t have insiders as directors.”

Smith is also the director at Elk Creek Resources, NioCorp’s Nebraska-based subsidiary. According to Paycheck Protection Program data, Elk Creek Resources received a $193,300 PPP loan.

Smith’s jobs go beyond his work with NioCorp. He is also the executive chair and CEO of IBC Advanced Alloys, a beryllium and copper manufacturing and distribution company.

Smith had previously run Molycorp, but its board of directors removed him in 2012. He then moved to Quantum Rare Earth in 2013, soon after Quantum rebranded to NioCorp as the rare-earth market remained depressed. Both companies are headquartered in Colorado.

NioCorp was contacted for comment on April 14 about the facts intended for publication on Mark Smith and the company. They did not respond.

“Colorado is not known to be the epicenter of good respectable companies,” Davis said. “Now over time maybe things have changed, but, you know, there were a lot of mining companies that got started in Colorado in the 70s and 80s that amounted to nothing, so, you know, sometimes the same players appeared in different projects.”

A 2020 financial analysis shorted NioCorp stock. The author, Christopher Ecclestone, had previously expressed confidence in the company after it had moved forward with its feasibility study in 2014.

The analysis stated that Niobium is NioCorp’s main asset. The company said the prospective mine’s lifespan is estimated at 32 years. That’s far less than the lifespan of existing Niobium mines. In a 2014 interview, Smith said that Molycorp had assisted in the development of a niobium mine in Brazil with an estimated lifespan of 500 years.

The department of revenue doesn’t disclose what tax-incentive tier an applicant is approved for, but all tiers have at least a five-year ‘attainment period.’ That’s time to get the big investment and hire 400 workers, after meeting those benchmarks the company would be entitled to a reduced tax liability for at least five years.

Due to Fulton’s NioCorp holdings, Gov. Pete Ricketts appointed Bruce Ramge and then John Albin to handle applications submitted by Elk Creek Resources.

“The argument they gave us was ‘he isn’t involved in the tax credit, there’s a whole different department that he has no control over.’ Ok, I guess we had to buy that because that was what the government was telling us. But I always felt ‘you’re the tax commissioner of the state, you don’t know about tax incentives, or have any influence over them?’ Yeah ok,” Gould said, referring to the response he’d received when asking the state government about the application approval process for Elk Creek Resources’ tax incentives.

Whether or not Elk Creek Resources has ever paid taxes is confidential as well, according to the Department of Revenue.

In 2017 and 2019, the company publicized that it had made agreements with the state to lower its taxes by $100 and $200 million respectively, provided the large investment is secured. After both announcements, the stock abruptly increased.

“You know, there seems to be a lot of speculation that it may be overvalued,” Davis said.